A Taxing Time on Donors!
11 September 2000 at 12:09 pm
The new July 1st tax system has created some interesting predicaments for many Not for Profits, not the least being how to explain it – to both new and long time donors!
Just when the issue of donor acknowledgments, such as naming rights and honour boards has been cleared up (yes, this offers a tax deduction for the donor) there is another complication.
The water appears to be a bit muddy in determining whether a free dinner to loyal or high donors, or offering a simple lapel pin, is of ‘no material benefit’ to your donors.
Probono Australia put a number of scenarios offered by one Not for Profit to the Australian Tax Office for clarification.
ATO spokesperson Jeneen McLeod says there are several tax rulings around this issue, but most relate to the GST (Goods & Services Tax) rather than tax deductibility for donors.
She says the ATO is also preparing a draft ruling on what constitutes a gift…but there is no release date as yet.
However, a look at the web site at www.taxreform.ato.gov.au, has found some definitions that may help.
Here are some key points:
‘Generally, where the item received by the person is of insubstantial value and in the nature of a receipt and the intention of the person was to donate money rather than purchase an item the activity would be considered to be a donation.’
‘The following are not considered to be a material benefit in relation to the making of a donation:
Listing of donors on a donor board
The provision of a mere acknowledgment or items of insubstantial value (for example a cup of tea) as the result of a gift.
A thank you lunch or dinner to volunteers working for an organisation where there is no pre-existing agreement that such provision will be made.
Membership of a donor club where no rights are bestowed on the member. This will be a matter of degree but an example would be a club where the donor receives things like a certificate and an infrequent newsletter but no right to vote.’
We will keep you posted of any further updates on this! Lets us know how your organisation has dealt with this issue via e-mail to email@example.com.